Proposed Rule Changes of Self Regulatory Organizations; Annual Filing of Amendments to Registration Statements of National Securities Exchanges, Securities Associations, and Reports of the Municipal Securities Rulemaking Board

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249

[Release No. 34-34140; File No. S7-17-94]

RIN 3235-AG15

Proposed Rule Changes of Self Regulatory Organizations; Annual

Filing of Amendments to Registration Statements of National Securities

Exchanges, Securities Associations, and Reports of the Municipal

Securities Rulemaking Board

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rulemaking.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is

proposing to amend Rule 19b-4 and Form 19b-4, the rule and form that

set forth the procedures for the filing by self-regulatory

organizations (``SROs'') of proposed rule changes under the Securities

Exchange Act of 1934. The amendments would expand the scope of those

proposed rule changes that may become effective under Section

19(b)(3)(A) of the Act. The proposed amendments are intended to

expedite and streamline the process through which proposed rule changes

are filed and become effective. The Commission also is proposing to

amend the rules and forms applicable to the annual filing of amendments

to registration statements of national securities exchanges, securities

associations, and reports of the Municipal Securities Rulemaking Board,

to streamline those requirements.

DATES: Comments should be received on or before August 8, 1994.

ADDRESSES: Comments should be submitted in triplicate to Jonathan G.

Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street,

NW., Mail Stop 6-9, Washington, DC 20549. Comment letters should refer

to File No. S7-17-94. All comment letters received will be made

available for public inspection and copying in the Commission's Public

Reference Room, 450 Fifth Street, NW., Washington, DC 20549.

FOR FURTHER INFORMATION CONTACT: Catherine McGuire, Chief Counsel, or

Andrew S. Margolin, Attorney, at (202) 942-0073, Office of Chief

Counsel, Division of Market Regulation, Securities and Exchange

Commission, 450 Fifth Street, NW., Mail Stop 7-10, Washington, DC

20549.

SUPPLEMENTARY INFORMATION:

I. Background on SRO Rule Filings

A. Statutory Framework for Filing of Proposed Rule Changes

Section 19(b)(1)1 of the Securities Exchange Act of 19342

(``Exchange Act'' or ``Act'') requires a self-regulatory

organization3 to file with the Commission its proposed rule

changes4 accompanied by a concise general statement of the basis

and purpose of the proposed rule change. Once a proposed rule change

has been filed, the Commission is required to publish notice of it and

provide an opportunity for public comment. The proposed rule change may

not take effect unless it is approved by the Commission or is otherwise

permitted to become effective under Section 19(b) of the Act.5

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\1\15 U.S.C. 78s(b)(1).

\2\15 U.S.C. 78a et seq.

\3\Section 3(a)(26) of the Act, 15 U.S.C. Sec. 78c(a)(26),

defines the term ``self-regulatory organization'' to mean any

national securities exchange, registered securities association,

registered clearing agency, and, for purposes of Section 19(b) and

other limited purposes, the Municipal Securities Rulemaking Board

(``MSRB'').

\4\Section 19(b)(1) of the Act defines the term ``proposed rule

change'' to mean ``any proposed rule or rule change in addition to,

or deletion from the rules of [a] self-regulatory organization.'' In

turn, Sections 3(a)(27) and 3(a)(28) of the Act provide,

essentially, that the term ``rules of a self-regulatory

organization'' means (i) the rules of the MSRB and the constitution,

articles of incorporation, bylaws, and rules, or instruments

corresponding to the foregoing, of any other SRO and (ii) such

stated policies, practices, and interpretations of an SRO (other

than the MSRB) as the Commission, by rule, may determine to be

necessary or appropriate in the public interest or for the

protection of investors to be deemed to be rules. The Commission has

exercised this rulemaking authority in paragraph (b) of Rule 19b-4

under the Act, which defines the term ``stated policy, practice, or

interpretation.'' See description, infra, at note 9.

\5\See generally Senate Comm. on Banking, Housing & Urb. Affs.,

Report to Accompany S. 249: Securities Acts Amendments of 1975, S.

Rep. No. 94-75, 94th Cong., 1st Sess. 22-38 (Comm. Print

1975)(``Senate Report''), reprinted in, [1975] U.S. Code Cong. & Ad.

News 179, 200-15 (excerpt on ``Self-Regulation and SEC Oversight'');

Note, Informal Bargaining Process: An Analysis of the SEC's

Regulation of the New York Stock Exchange, 80 Yale L.J. 811 (1971).

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Section 19(b)(2) of the Act6 sets forth the standards and time

periods for Commission action either to approve a proposed rule change

or to institute and conclude a proceeding to determine whether a

proposed rule change should be disapproved. Generally, the Commission

must either approve the proposed rule change or institute disapproval

proceedings within 35 days of the publication of notice of the filing

or within such longer period if the Commission finds appropriate or to

which the SRO consents. The Commission must approve a proposed rule

change if it finds that the rule change is consistent with the

requirements of the Act and the rules and regulations thereunder

applicable to the SRO proposing the rule change. If the Commission does

not make that finding, it must institute proceedings to determine

whether to disapprove the proposed rule change. The Commission also may

approve a proposed rule change on an accelerated basis prior to 30 days

after publication of the notice if the Commission finds good cause for

so doing and publishes its reasons for so finding.7

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\6\15 U.S.C. 78s(b)(2).

\7\Section 19(b)(2)(B), 15 U.S.C. 78s(b)(2)(B).

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Section 19(b)(3) of the Act8 provides that, in certain

circumstances, a proposed rule change may become effective without the

notice and approval procedures required by Section 19(b)(2). Paragraph

(A) of Section 19(b)(3) permits certain types of proposed rule changes

to take effect in this manner if appropriately designated by the SRO as

within the following categories: (1) Constituting a stated policy,

practice, or interpretation with respect to the meaning,

administration, or enforcement of an existing rule of the SRO;9

(2) establishing or changing a due, fee, or other charge imposed by the

SRO;10 or (3) concerned solely with the administration of the SRO.

Section 19(b)(3)(A)(iii) also gives the Commission the authority to

expand by rule the scope of proposed rule changes that may become

effective under Section 19(b)(3)(A) if the Commission determines that

the expansion is consistent with the public interest and the purposes

of Section 19(b). Rule 19b-4(e) implements the authority of Section

19(b)(3)(A) by detailing further the scope of proposed rule changes

that may be filed under Section 19(b)(3)(A). The rule tracks those

categories enumerated in Section 19(b)(3)(A) mentioned above and also

includes a category adopted in 1980 relating to registered clearing

agencies.11

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\8\15 U.S.C. 78s(b)(3).

\9\Rule 19b-4(b) defines the term ``stated policy, practice or

interpretation'' to mean generally any material aspect of the

operation of the facilities of the SRO or any statement made

available to the membership, participants, or specified persons

thereof that establishes or changes any standard, limit, or

guideline with respect to rights and obligations of specified

persons or the meaning, administration, or enforcement of an

existing rule. 17 CFR 240.19b-4(b).

\1\0The Commission has stated that as a matter of general

policy, a proposed rule change of an SRO, other than the MSRB, that

establishes or changes a due, fee, or other charge applicable to a

non-member or non-participant should be filed under Section 19(b)(2)

for full notice and comment. Securities Exchange Act Release No.

17258 (October 30, 1980), 45 FR 73906, at 73910.

\1\1The 1980 amendment, which is similar to the amendments

proposed today, expanded the category of filings that qualify to

take effect under Section 19(b)(3)(A) to include those proposed rule

changes that relate to mechanical or operational details of existing

clearing agency services and thus are similar to ``solely

administrative'' rules. The adopting release stated that the

Commission was not expanding the category at that time to include

rule changes of SROs other than registered clearing agencies, but

that it could become appropriate to do so as other SROs developed

more varied and complex services. Id. at note 51.

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B. The Market 2000 Report

In its Market 2000 Report (``Report''), the Commission's Division

of Market Regulation (``Division'') committed to working with the SROs

to streamline the review of proposed rule changes.12 The Division

noted in the Report that SROs have argued that the process for the

filing, review, and approval of proposed rule changes is too lengthy

and hampers the efforts of the SROs to provide prompt, flexible, and

innovative order-entry and trading services to their members and the

investing public.13 The Division agreed that the rule review

process should be expedited for routine procedural and administrative

modifications to existing order-entry and trading systems, but noted

that modifications that would restrict access, burden competition, or

modify provisions or procedures designed for the protection of

investors should continue to be considered after the applicable notice

and comment period under Section 19(b)(2).14 The Report also

indicated that the Division would consider other types of proposed rule

changes that could be subject to an expedited review process.

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\1\2SEC, Division of Market Regulation, Market 2000: An

Examination of Current Equity Market Developments VI-10 (Jan. 1994).

\1\3See Letter from Thomas M. O'Donnell, Chairman and Marc E.

Lackritz, President, Securities Industry Association, to Jonathan G.

Katz, Secretary, SEC (July 1, 1993); Letter from James E. Buck,

Senior Vice President and Secretary, New York Stock Exchange, to

Jonathan G. Katz, Secretary, SEC (November 24, 1992).

\1\4Market 2000 Report at VI-10.

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II. Expanding the Scope of Proposed Rule Changes Filed Under

Section 19(b)(3)(A)

A. Systems Changes

Pursuant to authority in Section 19(b)(3)(A)(iii) of the Act, and

consistent with recommendations made in the Market 2000 Report, the

Commission proposes to amend Rule 19b-4 and the instructions to Form

19b-4 by expanding the scope of proposed rule changes that may become

effective under Section 19(b)(3)(A). In particular, routine procedural

and administrative modifications to existing order-entry and trading

systems would become eligible for filing under this provision.

The Commission believes that proposed modifications to existing

systems that are operational in nature are not likely to raise the

policy concerns that warrant the full notice and comment procedures of

Section 19(b)(2).15 Accordingly, the Commission proposes to expand

the category of rule filings that are eligible for filing under Section

19(b)(3)(A) to include systems changes that do not significantly affect

the protection of investors or the public interest, do not impose any

significant burden on competition, and do not have the effect of

limiting access to or availability of the system.

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\1\5The Commission's Automated Review Policy II (``ARP II'')

sets forth the Commission's views on, among other things, the

circumstances under which an SRO is expected to notify the

Commission of expected changes to its automated systems. As

indicated in greater detail therein, the Commission believes that an

SRO should provide notification of certain systems changes not only

to inform the Commission for purposes of ARP II, but also to help

determine whether the systems change would require a filing under

Rule 19b-4. Securities Exchange Act Release No. 29185 (May 9, 1991),

56 FR 22490.

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Under the amendment, a proposed rule change that, for example,

would increase marginally the maximum number of shares per order that

could be executed through an SRO's small order routing and execution

system may be eligible to become effective upon filing.16 Another

example would be a proposed rule change expanding the number of series

or classes eligible for options routing and execution systems.

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\1\6In a 1983 letter to the exchanges and the NASD, the staff of

the Commission's Division of Market Regulation took the position

that rule changes relating to small-order systems should be filed

under Section 19(b)(2). See, e.g., Letter from Richard T. Chase,

Assistant Director, SEC, to Frank Wilson, Executive Vice President,

NASD (February 4, 1983). If adopted, the proposed amendments in the

release will supersede the staff's position to the extent of any

conflict.

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In contrast, a proposed rule change involving a systems change that

would affect the surveillance or oversight capabilities of the SRO or

other appropriate regulatory authority would not be properly filed

under Section 19(b)(3)(A). Such a rule change could directly impair the

protection of investors and thus should be filed under Section

19(b)(2). Another example of a proposed rule change that would not be

eligible for filing under Section 19(b)(3)(A) is one that would make

mandatory the use of a particular order-entry or trading system by

members. Because such a rule change could impose burdens on

competition, it should be filed for consideration under the more

comprehensive procedures of Section 19(b)(2). Similarly, it would be

inappropriate to permit a proposed rule change to become effective

immediately if it could have the effect of limiting the access to or

availability of the system to members or investors.

B. Other Noncontroversial Rule Filings After Prior Notice to the

Commission

The Commission also proposes to amend Rule 19b-4 and the

instructions to Form 19b-4, pursuant to authority in Section

19(b)(3)(A)(iii) of the Exchange Act, to expand the scope of proposed

rule changes that may become effective under Section 19(b)(3)(A) to

include certain noncontroversial filings, if the proposed rule change,

by its terms, does not become operative for 30 days after the date of

publication of the notice of filing or such shorter time as the

Commission may designate.17 For these filings, SROs also would be

required to provide written notice to the Commission five business days

prior to the filing.18 Filing this type of proposed rule change

under Section 19(b)(3)(A) should allow SROs to implement these rule

changes more quickly than if they were filed under Section 19(b)(2).

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\1\7This 30 day provision resembles a 1979 proposal by the

Commission that featured a 60 day post-filing operation date which

was never adopted. SROs objected primarily because the 60 day

provision, when combined with a 30 day pre-filing circulation period

among members, did not provide sufficient incentive to forego filing

the proposed rule change under Section 19(b)(2). The Commission

believes that today's proposal addresses these concerns. See

Securities Exchange Act Release No. 15838 (May 18, 1979), 44 FR

30924; Securities Exchange Act Release No. 17258 (October 30, 1980),

45 FR 73906.

\1\8For every clearing agency for which the Commission is not

the appropriate regulatory agency, this notice also would be filed

with the appropriate regulatory agency for the clearing agency as

required by Section 17(c)(1) of the Exchange Act, 15 U.S.C.

78q(c)(1). Consistent with the requirements of that section, the

Commission also would expect the MSRB to file such notices with each

agency enumerated in Section 3(a)(34)(A) of the Exchange Act, 15

U.S.C. 78c(a)(34)(A).

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This new provision only would apply to those proposed rule changes

that are properly designated by the SRO as not significantly affecting

the protection of investors and not imposing any significant burden on

competition. For purposes of meeting this requirement, the impact or

burden of a proposed rule change would be significant if, in the view

of the Commission staff or industry participants, the change would

require more than a cursory analysis to determine whether the impact or

burden was necessary or appropriate under the Exchange Act. Proposed

rule changes meeting these criteria generally are less likely to

engender adverse comments or require the degree of review attendant

with more controversial filings.

For example, a proposed rule change that adds an existing rule to

an SRO's minor rule violation plan, that is objective in nature, such

as a reporting obligation, and that does not involve a violation of the

federal securities laws or the rules thereunder, could be properly

filed under this provision. Another example would be a proposed rule

change permitting the transmission of data to or from the SRO by

computer interface or other electronic means. A proposed rule change,

however, that would reduce public representation in the administration

of the affairs of an SRO or that would amend the procedures for

arbitration or disciplinary proceedings would not be a proper candidate

to become effective under Section 19(b)(3)(A). These types of filings

implicate basic policy considerations with respect to the protection of

investors, and should be filed under Section 19(b)(2) to allow for more

careful scrutiny.

Under this new provision, the SRO would have to provide the

Commission with written notice of its intent to file the proposed rule

change, along with a brief description and the text of the proposed

rule change, at least five business days prior to the filing

date.19 The Commission expects that such notices will be brief and

informal and often will be transmitted by facsimile. This prior notice

would give Commission staff an opportunity to discuss with the SRO

whether there exists an adequate basis upon which the proposed rule

change may properly qualify under this provision. Furthermore, the

notice could elicit guidance from Commission staff to help the SRO

identify those aspects of a proposed rule change that the Commission

deems important. This should help the SRO articulate in its subsequent

filing the purpose and effects of the proposed rule change, which in

turn should further facilitate and expedite the filing process.20

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\1\9This notice would be directed to the appropriate Division

staff responsible for reviewing that SRO's filings of proposed rule

changes. The Commission intends to place this notice in a public

file. See Exchange Act Section 23(a)(3), 15 U.S.C. 78w(a)(3).

\2\0The Commission emphasizes that SROs should take extreme care

in assuring that all filings express the information necessary for

the Commission's review. Any filings that fail to comply with the

requirements of Form 19b-4 may be returned to the SRO and will be

deemed not to have been filed with the Commission.

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The requirement that a proposed rule change filed in this manner

cannot, by its terms, become operative prior to 30 days after the date

of publication of the notice of filing would provide a meaningful

opportunity for public comment prior to the rule's operation. This

would allow the Commission, if necessary, to abrogate the rule change

before it became operative in the least disruptive manner possible, if

the proposed rule change was determined to be inconsistent with the

requirements of the Exchange Act and the rules and regulations

thereunder. This 30-day requirement, however, could be shortened or

waived by the Commission if consistent with the protection of investors

and the public interest.

The Commission notes that it presently has the authority under

Section 19(b)(3)(C)21 of the Act to abrogate summarily within

sixty days of filing any proposed rule change that becomes effective

under Section 19(b)(3)(A). If the proposals to expand the scope of

proposed rule changes that may become effective under Section

19(b)(3)(A) are adopted, however, the Commission intends to revise its

rules to delegate this abrogation authority to the Director of the

Division. This would be necessary to facilitate an expected increase in

the volume of proposed rule changes that would be filed under Section

19(b)(3)(A).

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\2\115 U.S.C. 78s(b)(3)(C).

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C. Submission of Form 19b-4 on Paper and on Computer Diskette

During the past five years, the staff of the Commission has acted

on over 2,000 SRO rule filings. In addition to submitting a proposed

rule change on Form 19b-4, the SRO is responsible for preparing and

attaching an exhibit to the form containing the complete notice of the

proposed rule change for publication in the Federal Register. Staff of

the Commission may amend or supplement this notice in preparing it for

publication. If and when the proposed rule change is approved, staff

also prepares an approval order for similar publication. Thus

significant staff resources are devoted to processing these filings and

preparing them for publication.

The Commission therefore is encouraging SROs to submit certain

portions of all filings on computer diskette in an appropriate

wordprocessing format. This only would apply to Form 19b-4 and the

notice for publication (Exhibit 1 to Form 19b-4). The paper version of

these documents would continue to be required, but the electronic

version would provide a more efficient way for Commission staff to

review and prepare the initial notice for publication in the Federal

Register.

D. Miscellaneous Amendments to Form 19b-4

The Commission also is proposing to reduce the number of copies of

Form 19b-4 and Exhibit 1 that SROs must submit, from twelve to eight,

including the manually signed original. The Commission also is

correcting miscellaneous outdated references contained in Form 19b-4

with respect to the Commission's address and appropriate offices within

the Division to which filings of proposed rule changes should be

directed.

III. Background on Annual Filing of Amendments to Registration

Statements of National Securities Exchanges, Securities Associations,

and Reports of the Municipal Securities Rulemaking Board

Section 5 of the Exchange Act22 generally prohibits securities

transactions on a national securities exchange unless the exchange is

registered with the Commission pursuant to Section 6 of the Act.23

Section 6 sets forth the conditions for exchange registration and

requires that an exchange file an application for registration under

Rule 6a-1 under the Act.24 That rule requires an applicant for

registration, or for exemption from registration, to file an

application on Form 1,25 together with accompanying exhibits

containing, among other things, the rules of the exchange, its

financial statements, and its various forms, schedules, and membership

lists.

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\2\215 U.S.C. 78e.

\2\315 U.S.C. 78f.

\2\417 CFR 240.6a-1.

\2\517 CFR 249.1.

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Pursuant to Rule 6a-2, a registered or exempted exchange generally

must update its registration annually by filing amendments on Form 1-A

to reflect any changes in specified information contained in the

registration statement of the exchange or its accompanying exhibits

that were not previously reported in an amendment.26 The

Commission adopted amendments in 1983 to permit exchanges to update

exhibits containing the constitution, by-laws, and rules of the

exchange and its affiliates only once every three years.27 The

Commission believes that it can streamline the requirement to file

annual amendments for certain exhibits to exchange registration. This

information is either publicly available, becomes available to the

Commission through other means, or is not useful enough to justify the

burden placed on the exchanges in collecting and filing it with the

Commission each year. The Commission notes that for certain of these

exhibits, Exchange Act rules will continue to require national

securities exchanges to provide the Commission with prompt notification

after any action that renders those exhibits inaccurate.28 In

addition, Rule 17a-1 will continue to require exchanges to maintain and

preserve for prescribed periods all documents and other records made or

received by it in the course of its business and in the conduct of its

self-regulatory activity, and upon request of any representative of the

Commission, to promptly furnish such documents.29

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\2\6Exchange Act Rule 6a-2, 17 CFR 240.6a-2.

\2\7The Commission found the annual submission of these exhibits

to be unnecessary, particularly because Section 19(b) of the

Exchange Act requires exchanges to submit all proposed rule changes

to the Commission. Securities Exchange Act Release No. 19814 (May

26, 1983), 48 FR 24663.

\2\8Rule 6a-3 requires each exchange to notify the Commission

within 10 days after any action that renders inaccurate its

registration statement or any exhibit except exhibits E, F, L and M.

17 CFR 240.6a-3.

\2\915 U.S.C. 78q(a)(1); 17 CFR 240.17a-1.

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For the same reasons, the Commission proposes to amend the

analogous rules and forms applicable to national securities

associations (namely, the National Association of Securities Dealers,

Inc. (``NASD''))30 and the MSRB. The NASD has similar requirements

to update and file certain information annually, although the form used

for this purpose differs significantly from that used for

exchanges.31 For example, the registration and amendment forms

used by the NASD are organized along the lines of rule categories,

whereas the format for exchanges focuses on exhibits and lists. The

MSRB also has an annual reporting requirement.32 The Commission

believes that it would be appropriate to streamline the reporting

requirements for these SROs as well, and to the extent the reports

concern matters analagous to those applicable to exchanges, to conform

them with the requirements for exchanges.

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\3\0Currently, the NASD is the only national securities

association registered with the Commission.

\3\1See Exchange Act Rule 15Aj-1, 17 CFR 240.15Aj-1; Form X-

15AJ-2, 17 CFR 249.803.

\3\2See Exchange Act Rule 17a-21, 17 CFR 240.17a-21.

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IV. Description of Proposal To Amend Requirements for the Annual Filing

of Amendments to Registration Statements of National Securities

Exchanges, Securities Associations, and Reports of the Municipal

Securities Rulemaking Board

As described above, Rule 6a-2 of the Exchange Act requires an

exchange to update and file annually certain amendments to its

registration with the Commission. Exchanges submit these filings on

Form 1-A by referencing the appropriate exhibit to the exchange

registration being amended. Because the Commission believes that this

is unnecessary for much of this information, the Commission is

proposing amendments to Rule 6a-2 that would eliminate or reduce this

annual filing requirement for the following: Exhibit B (forms

pertaining to application for membership and approval as a person

associated with a member); Exhibit C (forms of financial statements,

reports, or questionnaires relating to financial responsibility);

Exhibit D (documents comprising listing applications including

agreements required in connection therewith, and a schedule of listing

fees); Exhibit I (list of all individual members and related

information); Exhibit J (certain information related to a list of all

member organizations of the exchange); and Exhibit K (schedule of

securities listed on the exchange). For all the remaining exhibits,

with the exception of Exhibits E and F, which concern financial

statements,\33\ exchanges would have the option, in lieu of the annual

filing, to publish or cooperate in the publication of this information

on an annual or more frequent basis, and to certify to the accuracy of

the information. Exchanges would have the further option of keeping the

information in Exhibits A(1), A(2), A(3), L, and M up to date, and

certifying that the information is up to date and available to the

Commission and the public upon request.\34\ In addition, the Commission

is proposing to add the date of election to membership, if available,

as an item to be filed by exchanges annually under Exhibit J. This is

necessary to enable the Commission to monitor the obligation of broker-

dealers to be a member of an SRO.\35\ It also will help the Commission

to designate an appropriate examining authority for each broker-

dealer.\36\

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\33\The annual filing requirement for these exhibits would be

retained because they are necessary to enable the Commission to

comply with Section 23(b) of the Exchange Act, 15 U.S.C. 78w(b).

That section requires the Commission to include in its report to

Congress each year a statement and analysis of the expenses and

operations of each SRO.

\34\Exhibit A(1) contains the constitution, articles of

incorporation, by-laws, and rules of the exchange; Exhibit A(2)

contains written rulings, settled practices, and interpretations not

contained in A(1); Exhibit A(3) contains the constitution, articles

of incorporation, by-laws, and rules of each affiliate or subsidiary

of the exchange; Exhibit L contains a schedule of securities

admitted to unlisted trading practices; and Exhibit M contains a

schedule of unregistered securities admitted to trading on the

exchange which are exempt from registration.

\35\Section 15(b)(8) of the Exchange Act, 15 U.S.C. 78o(b)(8).

\36\The Securities Investor Protection Act of 1970 contemplates

a designated examining authority for broker-dealers. 15 U.S.C. 78aaa

et seq.

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The Commission also is proposing to make corresponding changes,

where applicable, to the requirements for the NASD and MSRB. Thus, the

requirement to file certain information annually would be streamlined,

and the reporting requirements for the NASD and the MSRB would be

conformed, where appropriate, to the requirements for the exchanges. In

addition, similar to the proposal for exchanges discussed above, for

certain information, these SROs would have the option, in lieu of an

annual filing, of identifying the publication in which this information

is available or keeping such information up to date and making it

available to the Commission and the public. The Commission is

requesting specific comment on these proposals.

V. Conclusion and Request for Comments

The Commission believes that the proposals described above, if

adopted, would expedite and streamline the process through which SROs

file proposed rule changes with the Commission.\37\ The proposals also

would streamline the requirements to file amendments to registration

statements of national securities exchanges, securities associations,

and reports of the Municipal Securities Rulemaking Board. The

Commission requests comment on each of these proposals. The Commission

requests specific comment on the amendments to the annual filing

requirements for securities exchanges, securities associations, and the

MSRB, with a view toward maintaining comparable requirements for all

SROs.

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\37\These amendments may affect clearing agencies for which the

Commission is not the appropriate regulatory agency as defined in

Section 3(a)(34) of the Exchange Act, 15 U.S.C. 78c(a)(34).

Therefore, in accordance with Section 17A(d)(3)(A)(i) of the

Exchange Act, 15 U.S.C. 78q-1(d)(3)(A)(i), at least 15 days before

this announcement, the Commission consulted and requested the views

of the Board of Governors of the Federal Reserve System.

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VI. Effects on Competition and Regulatory Flexibility Act

Considerations

Section 23(a) of the Exchange Act\38\ requires the Commission, in

adopting rules under the Exchange Act, to consider the impact on

competition of those rules, if any, and to balance that impact against

the regulatory benefits gained in terms of furthering the purposes of

the Exchange Act. The Commission preliminarily is of the view that

adoption of the proposed amendments to Rule 19b-4, Form 19b-4, and Rule

6a-2 would not impose any burden on competition not necessary or

appropriate in furtherance of the purposes of the Exchange Act. The

Commission requests comment, however, on any competitive burdens that

might result from adoption of these amendments.

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\38\15 U.S.C. 78w(a)(2).

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In addition, Section 3(a) of the Regulatory Flexibility Act

(``RFA'')\39\ requires the Commission to undertake an initial

regulatory flexibility analysis of the proposed amendments on small

entities unless the Chairman certifies that the rule, if adopted, would

not have a significant economic impact on a substantial number of small

entities.\40\ Rule 19b-4 and Form 19b-4 apply only to SROs. Rule 6a-2

applies only to national securities exchanges. Furthermore, the

proposed amendments are intended to streamline a process to which these

SROs already are subject. The Chairman has certified that the proposed

amendments, if adopted, would not have a significant economic impact on

a substantial number of small entities.

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\39\5 U.S.C. 603(a).

\40\5 U.S.C. 605(b).

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List of Subjects in 17 CFR Parts 240 and 249

Reporting and recordkeeping requirements, Securities.

Statutory Basis and Text of Proposed Amendments

In accordance with the foregoing, Title 17, Chapter II of the Code

of Federal Regulations is proposed to be amended as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF

1934

1. The authority citation for Part 240 continues to read in part as

follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,

77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p,

78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37,

80b-3, 80b-4 and 80b-11, unless otherwise noted.

* * * * *

2. Paragraph (a)(1) of Sec. 240.6a-2 is amended by removing ``, or

in Exhibits B, C and D,'' and ``and Exhibits B, C and D''.

3. Revise paragraph (a)(3) of Sec. 240.6a-2 to read as follows:

Sec. 240.6a-2 Periodic amendments to registration statements or

exemption statements of exchanges.

(a) * * *

(3) Complete Exhibits G, H, J, L and M, except that Exhibit J need

only contain the name, principle place of business, and, if available,

the date of election to membership for each member organization. The

information contained in these exhibits shall be up to date as of the

latest practicable date within 3 months of the date on which the annual

amendment is filed. If a national securities exchange publishes or

cooperates in the publication of the information required in these

exhibits on an annual or more frequent basis, in lieu of filing such an

exhibit a national securities exchange may:

(i) Identify the publication in which such information is

available, the name, address, and telephone number of the person from

whom such publication may be obtained, and the price thereof; and

(ii) Certify to the accuracy of such information as of its date. If

a national securities exchange keeps the information required in

Exhibits L and M up to date and makes it available to the Commission

and the public on request, in lieu of filing such an exhibit a national

securities exchange may certify that the information is kept up to date

and is available to the Commission and the public upon request.

* * * * *

4. Section 240.6a-2 is amended by revising paragraph (b) to read as

follows:

Sec. 240.6a-2 Periodic amendments to registration statements or

exemption statements of exchanges.

* * * * *

(b) Unless exempted pursuant to paragraph (c) of this rule, on or

before June 30, 1983, and every three years thereafter each exchange

registered as a national securities exchange shall file complete

Exhibits A(1), A(2) and A(3) to its registration statement. The

information contained in these exhibits shall be up to date as of the

latest practicable date within 3 months of the date on which these

exhibits are filed. If a national securities exchange publishes or

cooperates in the publication of the information required in these

exhibits on an annual or more frequent basis, in lieu of filing such an

exhibit a national securities exchange may:

(1) Identify the publication in which such information is

available, the name, address, and telephone number of the person from

whom such publication may be obtained, and the price thereof; and

(2) Certify to the accuracy of such information as of its date. If

a national securities exchange keeps the information required in these

exhibits up to date and makes it available to the Commission and the

public on request, in lieu of filing such an exhibit a national

securities exchange may certify that the information is kept up to date

and is available to the Commission and the public upon request.

* * * * *

5. Paragraph (e) of Sec. 240.19b-4 is revised to read as follows:

Sec. 240.19b-4 Filings with respect to proposed rule changes by self-

regulatory organizations.

* * * * *

(e) A proposed rule change may take effect upon filing with the

Commission pursuant to Section 19(b)(3)(A) of the Act if properly

designated by the self-regulatory organization as:

(1) Constituting a stated policy, practice, or interpretation with

respect to the meaning, administration, or enforcement of an existing

rule;

(2) Establishing or changing a due, fee, or other charge;

(3) Concerned solely with the administration of the self-regulatory

organization;

(4) Effecting a change in an existing service of a registered

clearing agency that:

(i) Does not adversely affect the safeguarding of securities or

funds in the custody or control of the clearing agency or for which it

is responsible; and

(ii) Does not significantly affect the respective rights or

obligations of the clearing agency or persons using the service;

(5) Effecting a change in an existing order-entry or trading system

of a self-regulatory organization that:

(i) Does not significantly affect the protection of investors or

the public interest;

(ii) Does not impose any significant burden on competition; and

(iii) Does not have the effect of limiting the access to or

availability of the system; or

(6) Effecting a change that:

(i) Does not significantly affect the protection of investors or

the public interest;

(ii) Does not impose any significant burden on competition; and

(iii) By its terms, does not become operative for 30 days after the

date of publication of the notice of the filing, or such shorter time

as the Commission may designate if consistent with the protection of

investors and the public interest; provided that the self-regulatory

organization has given the Commission written notice of its intent to

file the proposed rule change, along with a brief description and text

of the proposed rule change, at least five business days prior to the

date of filing of the proposed rule change.

* * * * *

PART 249--FORM, SECURITIES EXCHANGE ACT OF 1934

6. The authority citation for part 249 continues to read in part as

follows:

Authority: 15 U.S.C. 78a, et seq., unless otherwise noted.

* * * * *

7. By revising the first sentence of instruction F of the general

instructions of Form 19b-4 (Sec. 249.819) to read as follows, and by

removing the asterisk contained therein along with its accompanying

footnote:

Note: Form 19b-4 does not and these amendments will not appear

in the Code of Federal Regulations.

Form 19b-4

* * * * *

General Instructions

* * * * *

F. Signature and Filing of the Completed Form

Eight copies of Form 19b-4, eight copies of Exhibit 1, four

copies of Exhibits 2 and 3, and two copies of Exhibit 4 shall be

filed with, in the case of filings by securities exchanges, the

Assistant Director for Derivatives and Exchange Oversight, in the

case of filings by securities associations or the Municipal

Securities Rulemaking Board, the Assistant Director for NMS and OTC,

and in the case of filings by clearing agencies, the Assistant

Director for Securities Processing, Division of Market Regulation,

Securities and Exchange Commission, 450 Fifth Street, NW.,

Washington DC 20549. * * *

* * * * *

8. Item 7 of the information to be included in the completed form

of Form 19b-4 (Sec. 249.819) is amended by removing the word ``or''

from the end of paragraph (b)(iii) and adding paragraphs (b)(v) and

(b)(vi) to read as follows:

Note: Form 19b-4 does not and these amendments will not appear

in the Code of Federal Regulations.

Form 19b-4

* * * * *

7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for

Accelerated Effectiveness Pursuant to Section 19(b)(2)

* * * * *

(b) * * *

(v) effects a change in an existing order-entry or trading

system of a self-regulatory organization that (A) does not

significantly affect the protection of investors or the public

interest; (B) does not impose any significant burden on competition;

and (C) does not have the effect of limiting the access to or

availability of the system, or (vi) effects a change that (A) does

not significantly affect the protection of investors or the public

interest; (B) does not impose any significant burden on competition;

and (C) by its terms, does not become operative for 30 days after

the date of publication of the notice of the filing, or such shorter

time as the Commission may designate if consistent with the

protection of investors and the public interest; provided that the

self-regulatory organization has given the Commission written notice

of its intent to file the proposed rule change, along with a brief

description and text of the proposed rule change, at least five

business days prior to the date of filing of the proposed rule

change,

* * * * *

9. Section IV of Exhibit 1 of Form 19b-4 (Sec. 249.819) is amended

by removing ``500 North Capitol Street,'' and adding in its place ``450

Fifth Street, NW.,'' and removing ``1100 L Street NW.,'' and adding in

its place ``450 Fifth Street, NW.,''.

Dated: June 1, 1994.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-13732 Filed 6-6-94; 8:45 am]

BILLING CODE 8010-01-P